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A note on tax analysis in a two-region model of monopolistic competition

Author

Listed:
  • Hikaru Ogawa

    (University of Tokyo)

  • Masafumi Tsubuku

    (Daito Bunka University)

Abstract

Takatsuka (Pap Reg Sci 93:595–617, 2014) compares the effects of ad valorem and unit taxes on firm location, within the framework of new trade theory. In the model, the unit tax is imposed at the instant of production, but the ad valorem tax is imposed at the instant of consumption. Since a portion of the good “melts away” during transportation, the actual amount of consumption (tax base) decreases from the point of production. This note presents a consistent application of taxation and clarifies how the timing of taxation characterizes the equilibrium location pattern.

Suggested Citation

  • Hikaru Ogawa & Masafumi Tsubuku, 2017. "A note on tax analysis in a two-region model of monopolistic competition," Letters in Spatial and Resource Sciences, Springer, vol. 10(3), pages 327-335, October.
    • Handle: RePEc:spr:lsprsc:v:10:y:2017:i:3:d:10.1007_s12076-017-0187-9
    DOI: 10.1007/s12076-017-0187-9
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    References listed on IDEAS

    as
    1. Hajime Takatsuka, 2014. "Tax effects in a two-region model of monopolistic competition," Papers in Regional Science, Wiley Blackwell, vol. 93(3), pages 595-617, August.
    2. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February.
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    More about this item

    Keywords

    Unit tax; Ad valorem tax; Monopolistic competition; Firm location;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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